The B-BBEE Commission has today released the report on the National Status and Trends on broad-based economic empowerment (B-BBEE) for the calendar year 2019, which report shows a 1% (43%: 2018 – 42%: 2019) decrease in the number of submitted compliance reports by JSE listed entities and 5% (10%: 2018 – 15%: 2019) increase by organs of state, with the majority of measured entities still failing to comply with section 13G of the B-BBEE Act. A webinar session to discuss the report will take place on 29 July 2020 at 10h00, facilitated by Shawn Theunissen (Property Point), and with panelists Andile Nomlala (Black Management Forum) Andile Khumalo (Entrepreneur) and Tabea Kabinde (Commission for Employment Equity).
Section 13G of the B-BBEE Act makes it compulsory for all JSE listed entities, organs of state, public entities and SETAs to submit compliance reports on B-BBEE to the B-BBEE Commission on an annual basis, which reports are analysed in terms of section 13F (1) (g) of the B-BBEE Act. The National Status and Trends on B-BBEE report is normally released in the first quarter of each financial year, but was delayed slightly due to Covid-19 national lockdown this year, and is now available on www.bbbeecommission.gov.za.
In total, the report is based on compliance reports from 150 JSE listed entities, 43 organs of state (including SETAs and public entities) and 5 818 entities whose B-BBEE certificates were uploaded to the B-BBEE Commission Certificate Portal for the year under review. The reporting helps the B-BBEE Commission to track how the country is performing against the scorecard set in the Codes of Good Practice and the respective sector codes on an annual basis, testing ownership, management control, skills development, enterprise and supplier development and socio-economic development.
This year’s report shows a slight change in the levels of transformation with the overall black ownership reflecting a 4% increase from 25% black ownership in 2018 to 29%, management control is sitting at 39% overall and JSE listed entities board control is at 43.6 % (male – 23.08%; female – 20.55%). The 2018 data indicated 45% overall and 38.3% (male – 16.7%; female – 21.6%) black South Africans held directorship on JSE listed entities. Only 3.3% of entities listed on the JSE are 100% black owned, which was 1.2% in 2018 and 1% in 2017.
The three least performing sectors on ownership in 2018 were AgriBEE (11.19%), MAC (19.55%) and financial (21.64%), with construction (48.03%), transport (40.53%) and forestry (33.66%) showing relatively good progress. In 2019 the three least performing sectors are AgriBEE (12%), financial (25%) and forestry (26%) with construction (44%), property (42%) and ICT (36%) showing a relatively good performance. Women ownership in 2019 remains around 10% in all sectors except property (11%), generic (12%), transport (12%), tourism (14%), construction (16%), MAC and ICT (17%).
On average, contributions towards skills development and enterprise & supplier development ranged between 50%-60% in 2018 and the 2019 performance shows an average of 49%-51%. Black people continue benefiting from bursaries, partnerships and incubation opportunities under these elements, however, absorption into a job or sustainable supply chain remains a challenge, amongst other things. The analysis has not expanded to cover the impact and sustainability of the initiatives reported.
The report shows that 49.3% (50.9% – 2018) of JSE listed entities are at level 4 and higher, while 50.7% (44.5% – 2018) entities are between level 5 and non-compliant B-BBEE status. State organs that reported show that 32.56% (45% – 2018) rated between level 1 and level 4, while 67.44% (55% – 2018) were level 5 to non-compliant B-BBEE status.
The B-BBEE Commission reiterates its concern about the low level of reporting and the overall slow pace of economic transformation. To address this, the B-BBEE Commission has started conducting site visits on the reports submitted verify the accuracy of the reports submitted and to identify best practices to share with other measured entities. Also, preparation to refer measured entities that failed to submit reports are underway as their conduct is not only a violation of the B-BBEE Act, but enables the harbouring of fronting arrangements.
There are also worrying trends observed over the three-year period 2017-2019. Though black ownership indicates slight change, the black ownership percentage does not always correspond with the management control scores. For instance, an entity is able to score full points for ownership and very low on management control, which gives the impression that despite black ownership recorded, black people are not involved in the control and core operations of the measured entity. Also, the saturation of management control points is still between junior and middle management, also noting the rotation of black executive from one measured entity to another, without utilising the skills development element to create a pipeline of new black executives.
Under the enterprise and supplier development element, measured entities are still not able to transform the value chain by developing sustainable black owned entities utilising the supplier development and enterprise development aspects of the element. Preferential procurement enables market access but does not automatically translate into enterprise or supplier development, and hence the three aspects be implemented in a complementary manner for the desired impact.
Further, whereas supplier or enterprise development focuses on creating sustainable black owned entities, most initiatives are increasingly implemented through a third party or intermediary, with less focus on the needs of the beneficiary. While the codes of good practice do allow for the use of a third party or intermediary to implement enterprise and supplier development, there must still be a comprehensive needs analysis, and a substantial part of the spend by the measured entity must be initiated and implemented with the beneficiary entity, and not for the benefit of the third party or intermediary that facilitates the initiatives.
For the real and accelerated broad-based black economic empowerment to be achieved, the B-BBEE Act must be applied consistently by both the private and public sector, particularly in regard to section 10 and section 13G of the B-BBEE Act, which are mandatory. Also, ownership, skills development and enterprise and supplier development are priority elements, however, performance overall is not satisfactory (see below table of 3-year summary).
National Status and Trends on B-BBEE Report Summary
|Organs of State & SOEs||1%(290)||10%(290)||15%(290)|
|B-BBEE Certificate Portal||2861||1674||5818|
|Overall Ownership(Overall include B-BBEE Certificate data information)||27%||25%||29%|
|Overall Black Women Ownership (Overall include B-BBEE Certificate data information)||9%||10%||12%|
|JSE Listed Entities Average Black Ownership||29%||25%||31%|
|100% black owned entities on the JSE||1%||1%||3%|
|Management Control(Overall include B-BBEE Certificate data information)||JSE||38%||38%||44%|
|Organs of State & SOEs||N/A||79%||68%|
|Overall Management Control||43%||45%||39%|
|Skills Development (Overall include B-BBEE Certificate data information)||JSE||35%||63%||59%|
|Organs of State & SOEs||N/A||64%||41%|
|Overall Skills Development||37%||49%||49%|
|Enterprise and Supplier Development (Overall include B-BBEE Certificate data information)||JSE||47%||70%||59%|
|Organs of State & SOEs||N/A||47%||59%|
|Overall Enterprise and Supplier Development||44%||60%||51%|
|Socio-Economic Development (Overall include B-BBEE Certificate data information)||JSE||79%||92%||89%|
|Organs of State & SOEs||N/A||65%||53%|
|Overall Socio-Economic Development||88%||71%||68%|
|B-BBEE Rating Level 4 – Level 1||JSE||41%||51%||49%|
|Organs of State & SOEs||N/A||45%||33%|
|B-BBEE Rating Level 5 – Non-Compliant||JSE||48%(12% No data)||45%(5% No data)||51%|
|Organs of State & SOEs||N/A||55%||67%|
A compliance driven strategy was applied over the three-year period (2017-2019) to encourage compliance and given high levels of non-compliance, the B-BBEE Commission has resolved to invoke the corrective enforcement strategy, which may result in adverse findings and entities referred for prosecution. The B-BBEE Commission, however, remains open to assist private and public sector entities to adhere to the B-BBEE Act free of charge.